I am a serial entrepreneur with more than 25 years of experience launching successful companies, including GetLoaded.com, a freight matching service for long-haul truckers that revolutionized the transportation sector. As a business owner and investor, I have financial interests in more than 30 companies which span a variety of industries, including transportation, technology, entertainment, real estate, energy, insurance, and mobile applications. I believe it's important for professionals to be strong community stewards and serve as mentors for the next generation of entrepreneurs. From Richmond, VA, I'm also active in philanthropic efforts throughout the United States and across the world. Want to connect? Leave comments here and find me online.

Three Tips to Approach Angel Investors

Entrepreneurs face a number of challenges when starting a business and I’m always impressed by the resilience of startups and their leadership. You’ve got to really believe in something to take the risk.

Believing is important, but as I’ve found, you also need a robust funding source. In order to survive and prosper, entrepreneurs need capital. This money can come from a variety of places – personal funds, bank loans, raising money from friends and family, or venture capital firms.

The Kauffman Foundation released its State of Entrepreneurship 2013 report earlier this year and I finally had a chance to read the report, which detailed financing challenges and opportunities for startups. It’s certainly worth reviewing. A corresponding panel discussion about the report is worthwhile as well.

Although the Kauffman report discusses a number of potential financing options for entrepreneurs, I want to focus on angel investing. I’ve got insight as both an angel investor and a serial entrepreneur who has pursued investors.

In my experiences, there are three keys to successfully approaching angel investors: preparation, relationship, and due diligence.

The first thing to realize is that angel investors expect you to be well prepared before approaching them. We have absolutely no interest in giving away our money to individuals or companies that are not going to provide a return on investment. That is why those companies need to remember three things before approaching an angel investor: are your finances in order, do you have a good management team, and do you have a detailed business plan?

As I’ve mentioned before, business plans and solid finances are critical to securing investors.

The second part of the angel investing process is all about the relationship. Unlike private equity firms and most venture capital firms, angel investing is a much more intimate relationship. Personalities matter a lot. As a possible investee, it’s your responsibility to determine which angel investor will be the right fit. Do they have experience in your industry? More importantly, do they have a personality that you can get along with? On the other side of the table, I have to ask myself the same questions. If there is no personality match then it is harder to get along down the road.

Relationships matter because angel investors are not just investing in the company, they’re investing in the people behind the company.

The third and final part of the process is due diligence. As I’ve seen throughout my career, angel investors are willing to take risks but they want to mitigate those risks. It’s an entrepreneur’s responsibility to bring as much information and proactive ideas to the table as possible. It’s an angel investor’s responsibility to review that information to the best of their ability. They have to ask the tough questions to find out what risks are involved. You can’t be discouraged by those questions but you do have to prepare for them. The more answers you can provide the more comfortable investors will be in partnering with you.

If and when you decide to consider pursuing angel investors, keep these three components in mind. Of course, how you communicate with investors once you have them is important and that was covered in an earlier post.

Let me know your experiences with angel investors and if you have any additional tips.

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